The 'unwelcome' ascent of the U.S. dollar 👑

Experts warn of the earnings headwind 💸

Rapidly rising U.S. interest rates and the strength of the U.S. economy relative to the rest of the world have investors everywhere pouring into the U.S. dollar.

While this is great news for Americans vacationing abroad and U.S. businesses importing goods from overseas, it’s a headwind for multinational U.S.-based corporations doing business in non-U.S. markets.

“When the dollar rises against, say, the euro, as it has done in the last year, then a company's euro-denominated sales are worth less once they're exchanged into dollars,“ Jurrien Timmer, director of global macro at Fidelity, explained.

According to FactSet, S&P 500 companies generate around 40% of revenue outside of the U.S.¹

(Source: FactSet)

And it’s not just about how the value of sales gets translated back to U.S. dollars. Sales in many non-U.S. markets are getting hit by downturns in those economies. In fact, many of those economies are getting slammed by how weak their currencies have become in international markets.